Assume that the following asset values (in millions of dollars) exist in ironmania:
• federal reserve notes in circulation = $700;
• money market mutual funds (mmmfs) held by individuals = $400;
• corporate bonds = $300;
• iron ore deposits = $50;
• currency in commercial banks = $100;
• savings deposits, including money market deposit accounts (mmdas) =$140;
• checkable deposits = $1500;
• small-denominated (less than $100,000) time deposits = $100;
• coins in circulation = $40.
a. what is m1 in ironmania?
b. what is m2 in ironmania

The value of M1 in Ironmania is $2240 while the value of M2 in Ironmania is $2,880.

Based on the information given, the computation for M1 will be:

= Federal Reserve Notes in circulation + Coins in circulation + Checkable deposits

= $700 + $40 + $15,00

= $2,240

The computation for M2 will be:

= M1 + Savings deposits, including money market deposit accounts (MMDAs) + Small-denominated time deposits + Money market mutual funds (MMMFs) held by individuals

= $2,240 + $140 + $100 + $400

= $2,880

Therefore, M1 is $2240 while M2 is $2880.

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a. $2,240

b. $2,880

Explanation:

The computations are shown below:

a. For M1

= Federal Reserve Notes in circulation + Coins in circulation + Checkable deposits

= $700 + $40 + $15,00

= $2,240

b. For M2

= M1 + Savings deposits, including money market deposit accounts (MMDAs) + Small-denominated time deposits + Money market mutual funds (MMMFs) held by individuals

= $2,240 + $140 + $100 + $400

= $2,880

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